Living Wage

Monday 9th June 2014 Lords Chamber

Question

14:59

Asked by

[Lord Haskel]

To ask Her Majesty’s Government what measures they are taking to ensure that all those in work receive a living wage.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie) (Con)]

We support businesses that choose to pay the living wage when it is affordable, and not at the expense of jobs. The Government are committed to improving living standards. We have cut taxes for the lowest paid, allowing them to take home more of what they earn, and we have introduced tougher penalties and naming for employers who have failed to comply with the national minimum wage, which maximises wages without damaging employment.

[Lord Haskel (Lab)]

But the Minister’s words are not carried out in practice. The reality is entirely different. Is the Minister aware that during the last three years, two-thirds of the increase in social security payments to people of working age has gone to people in work? So while the Government are cutting public services, the taxpayer is supporting low pay. Given that support, does the Minister agree that the taxpayer would be better served if instead the Government were more rigorous in getting employers to become more productive, so that they could pay a minimum wage on their own?

[Viscount Younger of Leckie]

I certainly agree with the noble Lord that we are encouraging more employers to be productive. Much work has been done to that effect but I point out to him that the minimum wage is now increasing faster than earnings. The rise of 3% in the adult rate will mean that low-paid workers will enjoy the biggest cash increase in their pay packets since 2008. A rigid formula does not allow for changing economic circumstances, for example imposing a target set by politicians. That would result in job losses if it is set too high and lower earnings if it is set too low.

[Lord Forsyth of Drumlean (Con)]

My Lords, does my noble friend not agree that the most important thing is take-home pay and that therefore the Government’s efforts to reduce the burden of tax on the low aid are what matter? Does he not think that an Opposition who refuse to deny that they would increase national insurance if they were in government have a cheek talking about the effect on living standards of taxation?

[Viscount Younger of Leckie]

My noble friend makes some good points. The only real way of achieving sustainable increases in living standards is through focusing on economic growth, employment and reducing taxes for the low paid, as he said. Christine Lagarde, the managing director of the IMF, said recently that the IMF had,

“underestimated the growth of the UK economy”.

In a significant turnaround, the fund’s latest assessment found that the UK economy had rebounded strongly.

[Baroness Lister of Burtersett (Lab)]

My Lords, welcome as the Minister’s support for decent wages is, wages cannot take account of family size. What steps are the Government therefore taking to restore the cuts in child benefit that they have made in order to protect the living standard of low-paid workers with children without subsidising low-paid employers, in the way mentioned by my noble friend Lord Haskel?

[Viscount Younger of Leckie]

We know that some households, including those with children, are seeing the amount that they spend on food increase but there is much that the Government are doing to resolve this. The Government provide a number of schemes to help the most vulnerable to afford and have access to nutritious foods, such as the Healthy Start scheme and free school meals. However, we also recognise the extremely valuable work of civil society in supporting local communities. There has always been a tradition in this country of voluntary and charity organisations providing support to people, as the noble Baroness will know, in addition to the safety nets that the Government provide.

[Baroness Humphreys (LD)]

My Lords, many workers on minimum wage continue to be trapped on low pay. The Resolution Foundation recently suggested that some sectors of the economy and businesses in London could probably well afford to pay more than the minimum wage, and recommended that the Business Secretary ask the Low Pay Commission to publish an analysis of the situation. Do the Government endorse the foundation’s recommendation?

[Viscount Younger of Leckie]

We encourage businesses to pay the living wage—indeed, the living wage or above. However, I say again that a mandated pay floor, completely detached from an affordable level, is likely to bring about job cuts. The National Institute of Economic and Social Research has estimated that increasing the national minimum wage to the living wage would cause a net job loss of 160,000.

[Lord Young of Norwood Green (Lab)]

My Lords, I trust that the Minister would agree that the introduction of the minimum wage in fact benefited millions of people who were on appalling levels of pay. Perhaps the problem with the minimum wage has been to ensure its consistent enforcement. At long last, the Government have got down to improving those measures but we still have a long way to go. What consideration has been given, first, to increasing the penalties, secondly, to ensuring that local authorities play a part in ensuring enforcement of the minimum wage and, thirdly, that all those who fail to pay it—including a major premier football club—are named and shamed?

[Viscount Younger of Leckie]

The noble Lord makes some good points about enforcement. We are taking strong action on this front. He will be aware that 25 other firms have been named and shamed in the past few days. The case of the Premier League football club that the noble Lord raises was dealt with under the old naming policy, pre-October 2013, and did not meet the financial criteria of £500 per worker so could not be considered for naming.

[Lord Flight (Con)]

Does the Minister accept that there is an element of chicken and egg in the comments of the noble Lord, Lord Haskel, and that it is actually since the Labour Government brought in tax credits that productivity has been flat, wages have not risen in real terms and the situation has been much the same as in the early nineteenth century when wages were subsidised?

[Viscount Younger of Leckie]

The noble Lord makes a good point. It is fair to say that Labour’s plan for encouraging tax breaks to encourage employers to pay the living wage applies for 12 months only and will cover less than one-third of the increased cost to the employer. Increasing the cost of employment could encourage businesses to employ fewer people. Labour’s estimates of the cost of this policy ignore these issues, and the party has considered only potential benefits to the Exchequer.

[Baroness Armstrong of Hill Top (Lab)]

My Lords, I wonder if the—

[Baroness Howarth of Breckland (CB)]

My Lords, I do not think any of the Minister’s replies have explained how his strategy will take out of poverty the millions of children who have just been illustrated in the report of one of the Government’s own commissions. It recognises that many families where there is childhood poverty, even though someone in the household is employed, are not being helped. What strategy do the Government therefore have to reach the jointly agreed target to take children out of poverty in the next decade?

[Viscount Younger of Leckie]

Several strategies are in place, but above all the main point is to encourage more jobs. We have created many millions of jobs and encouraged apprenticeships over the past few years since 2010. That is the way forward: to increase employment and job security for all in the UK.

[Baroness Armstrong of Hill Top]

I wonder if the Minister would say more about the report today from the social—

[The Chancellor of the Duchy of Lancaster (Lord Hill of Oareford)]

I am sorry, my Lords, I was hopeful that the noble Baroness could have got in, but we have a rule and the 30 minutes are up. I am so sorry.